Suspension By California Franchise Tax Board
Yesterday’s post concerned the two circumstances in which the Secretary of State might suspend a corporation. The California Franchise Tax Board will suspend a corporation if it fails to pay taxes, penalties, fees or interest (Cal. Rev. & Tax. Code § 23301) or fails to file a return (Cal. Rev. & Tax. Code § 23301.5).
These suspension provisions also apply to a foreign taxpayer if (and only if) it is “qualified to do business” in California. Cal. Rev. & Tax. Code § 23301.6. The phrase “qualified to do business” in the statute, however, is inapt. Under the General Corporation Law, a foreign corporation qualifies to “transact intrastate business”. Cal. Corp. Code § 2105.
The consequences of suspension by the Franchise Tax Board are significant. According to the Franchise Tax Board, a suspended corporation may not:
Legally transact business
Bring an action or defend itself in court
Receive an automatic extension of time to file
File a claim for refund
File or maintain an appeal before the Board of Equalization.
Begin or continue a protest
Legally close or dissolve the business
In addition, a suspended corporation may lose its right to revive under its own name if another corporation appropriates its name during the period of suspension.
In a future post, I’ll discuss how to revive a foreign corporation from suspension by the Franchise Tax Board.